We’re fast approaching the end of the financial year and doing some preparation now will pay off later with a tax refund or lower tax bill.
It’s easy to forget small items of expenditure but they can often add up to a substantial tax deduction.
As June 30 approaches, here are some last-minute ways to save on tax.
Internet and mobile use
If you sometimes take work home, check work emails there or make work-related calls on your mobile, you can claim as a deduction at least some of your personal internet and phone bills.
Etax Accountants General Manager Simone Gielis says it’s important to start taking note of how much of your home internet or mobile phone use is work-related.
“If you pay $60 per month for your internet, and you estimate that 40 per cent of your use is for work purposes, that adds up to $24 per month, or $288 per year, that you can claim as a deduction on your tax return,” she said.
The same calculation method applies for your mobile phone.
It’s important to remember that if you split your internet bill with a spouse or housemate, you can only calculate from your share.
Prepay rental or work-related expenses
If you own a rental property, prepaying expenses up to 12 months in advance can give you a tax deduction in this financial year.
You can also prepay income protection insurance, membership fees for unions and professional organisations and subscriptions for work-related newspapers and publications.
H&R Block director of tax communications, Mark Chapman, says landlords can accumulate substantial expenses over a year, often in relatively small amounts such as for clearing up when tenants leave, gardening and repairs.
Property owners can also overlook the depreciation allowance for their rented property.
“People can claim it as a deduction based on the actual cost of the property when it was built, plus improvements over time,” he said.
The deduction can be several thousands of dollars a year, so Mr Chapman says it’s important to get the calculation right and it may be worth hiring a quantity surveyor.
Small business tax breaks
If you run your own business with an Australian Business Number (ABN), you might be able to take advantage of the small business tax breaks.
Any business-related items costing under $20,000 each are eligible for an immediate tax deduction in the year you buy them, so you don’t have to depreciate the purchase over its effective working life.
Before placing an order, remember these tax deductions are not a dollar-for-dollar refund. Any expenses you claim are deducted from your taxable income so you are likely to get back well under half the value of the expense.
There is still time to instantly claim any item costing less than $300 if it is bought for income-producing purposes, so you have time to buy that new portable hard drive, bluetooth keyboard, or wireless router.
More expensive items are depreciated over their effective working life.
The cost of last year’s tax return
One of the most forgotten deductions is the cost of a tax agent for preparing last year’s return.
More than 70 per cent of taxpayers use a tax agent, but the Australian Tax Office’s (ATO) own data shows only 49 per cent of tax returns include a claim for the cost of last year’s return, Ms Gielis said.
A final warning
This year the ATO will be looking out for inflated or above average deduction claims based on occupation.
That includes claiming for expenses your employer has paid, travel expenses where the travel begins or ends at home and inaccurate rental claims on newly-acquired properties.
June 30 is approaching fast, but there is still time to plan and organise the deductions you can claim.